Board Gender and The Effect On ESG Ratings

Board gender diversity and the effect on ESG ratings
Erasmus University Rotterdam – Erasmus School of Economics
Stefan van Zundert

500570sz
Supervisor: Yijun Li
Second Assessor: Ying Gan
The content of this thesis is the sole responsibility of the author and
does not reflect the view of either the supervisor, second assessor, Erasmus School of
Economics or Erasmus University.
Abstract
The growing attention for non-financial reporting introduces many laws and guidelines to
increase non-financial performance and reporting. Previous researched topics in this area are
ESG ratings and gender diversity in corporate board of directors. Governments around the
world try to improve the gender diversity of corporate boards and previous literature finds
positive connections between gender diverse boards and non-financial performances. On the
other hand, ESG ratings are measuring these non-financial performances. The non-financial
performance measurements are also becoming more regulated in the upcoming years. This
paper tries to connect these topics, by analyzing the effect of gender diverse boards on the
ESG performance of Dutch companies. The results show that increasing the amount of
(underrepresented) females in the board of directors, which increases gender diversity of a
board, leads to an increase in all three pillars of the ESG score of a firm.
Keywords: ESG score, environment, social, governance, board gender diversity
1
Table of Content
1. Introduction .................................................................................................................................... 3
2. Theoretical background .................................................................................................................. 6
2.1 Gender diversity in the Netherlands ...................................................................................... 6
2.2 The rise of ESG ........................................................................................................................ 7
2.3 Connection between gender diversity and ESG .......................................................................... 8
3. Data and Methodology ................................................................................................................. 11
3.1 Sample Selection................................................................................................................... 11
3.2 Methodology......................................................................................................................... 16
4. Results ........................................................................................................................................... 17
4.1 Environmental score ................................................................................................................... 17
4.2 Social Score ................................................................................................................................. 19
4.3 Governance Score ....................................................................................................................... 22
4.4 Overall ESG Score........................................................................................................................ 23
4.5 Robustness checks ...................................................................................................................... 25
5. Conclusion and Discussion............................................................................................................ 26
6. Bibliography .................................................................................................................................. 27
7. Appendix ....................................................................................................................................... 32
2
1. Introduction
Research on gender equality is a wide topic with many prior literatures which analyze effects
of including, or excluding, different genders. In the labor market, this topic also gets a lot of
attention. Reasons for the interest in this topic are pay gaps, which might be based on gender
differences, and the distribution of men and women in the workspace. Data from The World
Bank Group (2023) shows that the percentage of females working with an advanced, basic or
intermediate education background is lower than that of their male counterparts. This lower
percentage of female participation is also visible in the board of directors of large firms
worldwide. Adams and Ferreira (2009) showed that women only held 14.8% of fortune 500
board seats. In Europe, at the time, only 8.0% of the directors was female and there used to
be firms without any female directors (Laffarga, de Fuentes, & Reguera-Alvarado, 2015). The
percentage of female directors in Europe has grown in the past years to 30.6% in 2021
(Kerneïs, 2022)
To adress these differences in board (in)equality, many researches came with reasons why a
more diverse board would be beneficial. Part of the findings of this prior literature is focussed
on financial effects of firms. The findings have contradicting results. Erhardt, Werbel and
Shrader (2003), Post and Byron (2015), Laffarga et al., (2015), and Gordini & Rancati (2016) all
found positive effects between board diversity of a firm and its financial performances. On the
other hand, Adams and Ferreira (2009), Mínguez-Vera and Martin (2011), and Darmadi (2011)
all disagree with these findings and conclude no or negative relations between board diversity
and financial performances.
Another part of previous literature shows non-financial benefits of more diverse boards.
General research about gender diversity show that females care more (Queller, 1997) and
behave more ethical (Mason & Mudrack, 1996) than males. Sánchez-Teba et al., (2021)
translate this to the board workspace by finding that female directors are valuable through
their empathic capabilities and their group interest. They also find that women have more
risk-aversion and are more open to innovation.
Other research find that gender diverse boards also have improved supervision on activities
of a firm and boards are better monitored (Erhardt et al., 2003 and Adams & Ferreira, 2009).
These findings relate to work of Cumming, Leung and Rui (2015), who find a negative
correlation between gender diversity and the frequency of fraud of a company. These findings
are also in line with Bernardi and Threadgill (2010), who conclude that gender diversity
improve corporate social responsibility of a company and diverse boards tend to care more
about society.
Lastly, prior research also finds positive relations between gender diverse boards and the
environment. Al-shaer and Zaman (2016) find that gender diverse boards have qualitative
higher sustainability reports. Adding to these findings, Li, Zhao and Chen (2016) show an
increase in a firms’ enviromantal policy if boards are more gender diverse.
3
So the above findings on gender diverse boards are more pronounced for non-financial
activities. These non-financial activities are becoming increasingly important for both firms
themselves and their stakeholders. In 2022, the European Parliament voted in favor for the
adoption of a new Corporate Sustainability Reporting Directive (CSRD). This new directive is
the successor of the current Non-Financial Reporting Directive (NFRD) and aims to make
European businesses more accountable for the public through mandatory reporting standards
on their environmental and societal activities. The CSRD should help in achieving the European
climate goals, reduce greenwashing, strengthen the European social market economy, and
become the basis of a universal framework for sustainability reporting (Yakimova, 2022;
European Parliament, 2022).
One of the adoptions in the new directive, is a framework to disclose Environment, Social and
Governance (ESG) related risks (European Parliament, 2022). ESG reporting is considered as
one of the biggest developments in recent years and is widely integrated in the decision-
making process of directors, shareholders, and other stakeholders (Christensen, Serafeim, &
Sickochi, 2022). Several rating agencies rate companies on their ESG performances and the US
Securities and Exchange Commission (SEC) is already increasingly regulating ESG disclosures.
For example, the SEC charged Goldman Sachs Asset Management on the 22nd of November
last year, because Goldman Sachs failed to follow their policies related to ESG investments
(SEC, 2022).
Besides being more regulated, ESG reporting is shown to affect firm value as well. As
mentioned above, ESG related information affects the decision making process of different
stakholders. Serafeim and Yoon (2022) find that both ESG ratings and ESG related news is
positively related to stockprise increases of a given firm, which shows that investors use ESG
information in their decision to value a company. Fatemi, Glaum and Kaiser (2018) add to this
literature, as they find that disclosing ESG information affects investor decisions. Positive ESG
disclosure tend to strenghten firm value, while negative ESG disclosure weakenss a decrease
in firm value.
One of the countries in the EU which will get regulated on ESG reporting, by the new CRSD, is
the Netherlands. Besides these new regulations, the Dutch government itself accepted a law
to equal the male-female distribution in the top of the businesslife (Rijksoverheid, 2021). This
law is active since the beginning of 2022 and with this “ingrowht quota”, as it is called, the
Dutch government tries to wider the pool of (manegerial) talent and aims to capture the
previous mentioned benefits of gender diverse boards (SER, 2019).
Combining the positive effects of gender diverse boards on non-financial reporting and the
raising importance of non-financial reporting, this paper aims to find out if these positive
effects are indeed visible in the ESG rating of Dutchs companies. The above mentioned
benefits of gender diverse boards, seem related to the pillars of ESG. Increased enviromental
policies relate to the Environment pillar1, improved social responsibility link to the Social pillar2
and the diversity itself and behavior of a board is attatched to the Governance pillar3. These
three relations lead to the following research question of this paper:
1
Based on the definition of MSCI (2020) and Thomson Reuters (2017)
2
3
4
“How does board gender diversity affect a firm’s ESG performance in the Netherlands”
This research question contributes to prior research on the literature of board diversity. By
adding information of the effecs of board gender diversity on the ESG performance of a
company, the literature about non-financial effects of gender diversity in boards will be
broadened. The use of the Dutch market also benefits previous literature as, by the best
knowledge of the author, this market is not commonly used before in this area. Mostly the US
or countries with already existing genderquota’s were used and got most attention in previous
literature. See for example the work of Laffarga et al., (2015) and Mínguez-Vera and Martin
(2011) in Spain or Leszczynska (2018) in Norway.
The results of this paper can be used by different stakeholders. First, companies themselves
can use the results in the appointment of board members. When a company scores bad on
ESG rating, it might consider a different composition of its board of directors. The results might
also be used to change governance code of a firm, related to gender diversity. Second,
regulators could use the results to determine if regulation on gender or genderquota’s in
boards are needed. With increasing the mandated ESG reporting, it might be helpful to set
rules in board compositions that benefit behavior towards ESG reporting. Lastly, investors and
other public, with special interest in ESG, could use the results from this paper in their
investment decision of other decisions related to a specific firm. An investor with interest in
ESG quality can use the results of this paper to look at the effect of gender diversity on ESG
performance. Investors then can set a certain amount of gender diversity as a benchmark and
use it as a factor in deciding whether or not to invest in a firm with certain board gender
diversity levels.
The paper is structured as follows. First, data selection and summary statistics are presented
to form a view of the used dataset. This section is followed by the methodology of this paper,
where the OLS regegression for the research is explained. Next, the results are presented per
ESG pillar. The results start with the regressions for the environmental pillar, followed by the
social and governance pillars. To end the result section, the total ESG score and the robustness
checks are presented. The conclusion gives a short summary of the results and a discussion
for further research.
5
2. Theoretical background
This chapter explains the theoretical background of gender diversity and ESG. First, the
literature on gender diversity will be summarized. Second, there will be a concise explanation
on what ESG is, what the components are and how these are measured. After the theory is
explained, hypothesis will be created to answer the research question.
2.1 Gender diversity in the Netherlands

Gender diversity studies are not a new concept. The first studies date back to the end of last
century (e.g., Siciliano (1996) and Elgart (1983)). At the time, most studies found that women
were underrepresented in boards. In 1980, only 2.8 percent of director positions of Fortune
500 firms were covered by females, and it was forecasted that it would take nearly 200 years
to get an equal representation (Elgart, 1983). This percentage has grown over the years.
Kerneïs (2022) show that, in the European Union, this percentage was 30.6% for the largest
publicly listed companies in 2021.
One way to improve this percentage, is through (mandatory) genderquota’s. The European
Comission (2012) is trying to improve gender diversity through directives about gender
quota’s since 2012. Their proposal gave the member states an option to choose their own
measurments to achieve the goals stated in the directive. The main goal is to eventually get
40% of the underrepresented gender in the board of directors as non-executive director. In
2021, 16 out of 27 member states had some kind of gender measure (Kerneïs 2022). The share
of womans in countries with mandatory gender quota’s was on average of 35%. Countries
with soft measures score just less than the EU average, with around 29%. This percentage is
still nearly double the amount of the countries without any action taken on gender diversity.
These countries only have an average female director share of 17%.
The Netherlands is one of the countries which use actions to equal the gender diversity ratio
of boards. The population in the Netherlands has an equal gender distribution, where for
every 99 males, there are 100 females (CBS, 2022). With an average female representation in
boards of 27,7% in 2022, Dutch companies are 25th in the EU (CBS, 2023). Between 2013 and
2020, the Netherlands had a system of “comply or explain”. Through this approach, companies
got to choose if they would balance the gender distribution in their boards or not. The rule
was that the board of directors4 (in Dutch RvB) and the supervisory board5 (in dutch RvC) must
consist of at least 30 percent male and 30 percent female. The other 40 percent is free for
both gender, as long as the target of 30 percent per gender holds. If a firm balanced their
gender distribution, it would comply with the regulation method of the Dutch Social Economic
Counsil (later called ‘SER’). When a firm choose to not balance their gender distribution, it had
to explain why they choose not to do so and report this to the SER (2019).
4
In a one tier board: Executive directors.
5
In a one tier board: non-executive directors.
6
This approach did not lead to the desired effect. Only 16 out of 89 listed companies complied
with this approach (Lückerath-Rovers M., 2021). In combination with the facts that nearly 53%
of students is female and over 68% of females participate in the labourmarket, as of 2022
(CBS, 2023), the Dutch government changed their approach. This led to a new legislative
propasal, which was accepted and became active per first of januari 2022, named
“evenwichtiger verhouding vrouwen en mannen in het bestuur en raad van comissarissen”.
This so called gender diversity law becomes mandatory and states that at least one third of
the non-executive directors must be male and at least one third must be female for listed
Dutch companies. These companies cannot attract an non-executive director of a gender if
the opposite gender does not comply with the new law. For executive directors of these listed
companies and both types of directors of the 5000 non-listed big Dutch companies, applies
the same distribution in the form of a targetnumber. This targetnumber must be substantiated
through an action plan. (Dutch Government, 2021; SER, 2019).
2.2 The rise of ESG

Another item for companies that is becoming more regulated, is sustainability reporting. In
2014, the EU adopted the NFRD to require larger companies to disclose non-financial
information which is relevant for investors and other stakeholders (European Comission,
2014). This information consists of environmental matters, social and employee aspects,
human rights, diversity in boards and anti-corruption reporting. Firms in the EU had to report
on their non-financial policies and their non-financial results. The guidelines for disclosing this
information were non-binding. Companies have no framework on how to report this
information and could even choose to not report at all. This also means there is no universal
definition of ESG performance. Rating companies, such as MSCI, Asset4 or Sustainalytics, try
to capture ESG performance based on provided sustainability related information in
companies’ (financial) statements. Based on their own frameworks, these rating agencies give
firms a score for their ESG performance (Christensen et al., 2022)
After the damage of Covid-19, the aim to become a resource efficient union, and to protect
the health and well-being of EU citizens, the European Parliament (2022) came with the new
CSRD to improve the sustainability reporting requirements of the NFRD. This new directive
covers all relevant ESG elements and will be active for big companies at the beginning of 2024.
The ESG elements are covered under the European Sustainability Reporting Standards (ESRS),
which are provided by the European Financial Reporting Advisory Group or EFRAG. The ESG
pillars will be classified in E, S and G. At the time of writing, EFRAG (2022) provide the following
definitions in their first draft.
The E pillar stands for environment and consist of ESRS E1-E5. It will cover pollution, climate
change, biodiversity and ecosystems, water and marine resources, and resource use and
circular economy. Next, the S pillar stands for social and is made up from ESRS S1-S4. Own
workforce, workers in the value chain, affected communities, and consumers and end users
are all included in this pillar. The last pillar is G and aims to describe the governance. ESRS G1
refers to this pillar and includes governance, risk management, internal control, and business
conduct.
7
Besides the non-financial effects associated with ESG scores, there is also research on the
financial effects of ESG scores. Approximately 90% of studies find a non-negative effect and
more than half conclude a positive relation between ESG rating and financial performance
(Friede, Busch, & Bassen, 2015). Shanaev and Ghimire (2022), Kang and Jung (2020), and Berg,
Heeb and Kölbel (2023) all measure the effect of ESG on firm value. They find that an upgrade
in ESG rating leads to a smal (in)significant increase in abnormal returns, while a decrease in
ESG rating causes a relatively bigger decrease in stock value. Serafeim and Yoon (2022) add to
these findings that disagreements among raters, due to the missing framework at the time,
reduce the above mentiond effects. The positive relation between ESG rating and a firm’s
(corporate) financial performance, is seen as a mediating effect of the positive relation
between ESG and firm value (Zhou, Liu, & Luo, 2022).
2.3 Connection between gender diversity and ESG

So far, the growing emphasis of gender diversity in boards and the benefits of ESG ratings
are explained. As mentioned in the introduction, prior literature on gender diversity shows
positive relations for non-financial effects and contradictory results for financial effects.
Gender diverse boards tend to have higher quality sustainability reports, which include social
and environmental information about a company (Al-shaer & Zaman, 2016). The positive
relations of non-financial reporting, like the increased sustainability reporting quality, could
be connected to the ESG rating according to definitions of EFRAG (2022) and raters such as
MSCI (2020) and Thomson Reuters (2017).
Liao, Luo and Tang (2015) find in their report that the gender diversity in boards has a positive
relation with the amount of greenhouse gas disclosure. These boards have a higher change to
voluntary disclose greenhouse gas information and provide significant more information. As
seen before, greenhouse gas can be placed in the environmental pillar of ESG. MSCI (2020)
has greenhouse gas defined in their emission, same as Thomson Reuters (2017), and carbon
intensity parts of the environment pillar. Greenhouse gas is also included by the EFRAG (2022),
which made ESRS for climate change6 and pollution7.
Another ESRS for the environmental pillar is water and marine resources 8. This relates to
recent research of Peng, Lan, Li and Fan (2023), who find a positive relation between gender
diversity and water disclosure of a company. Both researches mention that these positive
relations are caused by the moral characteristics of female board members. Thomson Reuters
(2017) also mention the importance of resource use in their environment pillar.
Lastly, Li et al., (2016) add to the above findings by concluding that a firm’s environmental
policy is positively affected by a more gender diverse board. All these previous findings lead
to the first hypothesis of this paper:
H1: There is a positive relation between gender diversity in boards and environment
performance of a firm.
6
ESRS E1 (EFRAG, 2022)
7
8
8
This paper expects a positive relation between diversity and the E pillar score of a firm,
because the previous literature concludes several positive effects on environmental related
cases. The E pillar score represents the environmental performance of a firm.
Another part of previous research on gender diversity relates to the social pillar of ESG. Female
directors are more likely to care about the community rather than individuals (Queller, 1997).
This is also shown by Sánchez-Teba et al., (2021) who analyzed that an increase in females in
an male dominated board lead to more attention for group interest. This community interest
consist of nearly a quarter of the weight in the social pillar and 8% of the total ESG score
measured by Thomson Reuters (2017). The only measurment with a bigger weight in the social
pillar is workforce, which is twice as big. Workforce and community are also mentioned by the
EFRAG (2022), divided in own workforce9, workers in the value chain10 and affected
community11.
Bernardi and Threadgill (2010) and Lin, Liu, Huang and Chen (2018) analyse the effect of
gender diverse board on community and workforce. For the community benefits, the paper
finds that a gender diverse board is more likely to sponsor or create organizations that benefits
surrouding communities, such as employee volunteer programs and increased charitable
donations. They also find that (female) employees get more benefits and suitable policies if
boards are more gender diverse. Ranta and Ylinen (2023) add to this by concluding that a
gender diverse board improve overall gender equality and inclusiveness among employees.
They also mention that not all kind of diversities have a significant positive relation with
gender diverse boards, such as age diversity. The overall conclusion of the papers is that the
social involvement increases when females are added to a board. Based on these findings, the
second hypothesis will be as follows:
H2: There is a positive relation between gender diversity in boards and social
Going further on the previous literature, the expecations of this paper are an increase in S
pillar score, which represents the social performance, when gender in boards is more equal.
It is important to mention that gender diversity of a board itself is also included in some
definitions as a measurment of the social pillar. Therefore, if gender diversity increases, the
social pillar score would automatically rise along. Both MSCI (2020) and ESRS S1 mention that
they include a gender diversity ratio in their measurment. To measue the second hypothesis
in this paper, the analysis that will be conducted shall be done both with and without this
measurment to reduce causality in the results. This measurment is later defined as the
‘Workforce score’.
9
ESRS S1
10
ESRS S2
11
ESRS S3
9
The last pillar of ESG is the governance pillar. The governance pillar includes the corporate
culture of management (Thomson Reuters, 2017; EFRAG, 2022). This is defined by the
monitoring of management and the amount of corruption and bribery of the board. Also
corporate social responsibility (CSR) strategy itself is included in the G pillar (EFRAG, 2022;
Thomson Reuters, 2017).
Prior literature on gender diversity assumes a positive effect with corporate culture in boards.
Bernardi and Threadgill (2010), and Gupta, Lam, Sami and Zhou (2015) confirm this by pointing
out that gender diverse boards have a positive effect on CSR strategy. This is also the case for
monitoring of the board. Adams and Ferreira (2009) mention that females improve monitoring
of the board, as they are more likely to attend meetings and join monitoring committees.
Another reasearch related to corporate culture, is from Cumming et al. (2015). Due to the
increased risk aversion of females, they find a negative relation between gender diversity and
frequency of fraud in a company. This negative relation is more pronounced if females join a
board in a male dominated industry. The same results hold for the severity of fraud. Also the
amount of restatements decreases when at least one female is on the board (Abbott, Parker,
& Presley, 2012) These relations lead to the third hypothesis of this paper:
H3: There is a positive relation between gender diversity in boards and governance
As previous literatue on monitoring and fraud show positive effects of gender diversity, this
paper expects to see a positive relation between board gender diversity and the governance
score.
Lastly, a fourth hypothesis will be constructed for the total ESG score. This hypothesis will
become important when at least one previous hypothesis is rejected. As this paper expects a
positive relation for all three pillars of ESG, the last hypothesis will be:
H4: There is a positive relation between gender diversity in boards and overall ESG score
of a firm.
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3. Data and Methodology
This chapter gives information about where the used data came from, and which methodology
is used to measure the results. First, the source and process of the data selection is explained.
After this, the formula to answer the hypothesis is explained in the methodology section.
3.1 Sample Selection

Data on board characteristics is obtained from BoardEx through Wharton Research Data
Services (WRDS). First, BoardEx database of Europe is chosen, and the ‘organizational
summary’ data is selected to create a dataset. This dataset is filtered to board related
information of companies in the Netherlands. This led to a dataset of 1,108 board-year
observations of Dutch firms.
Next, data on ESG ratings is collected from Asset4, which is owned by Thomson Reuters. This
rater is commonly used in prior ESG research12 and is also, at the time of drafting this research,
the only rater with recent data available for the researcher. The Asset4 data is retrieved from
the Erasmus Data Service Center (EDSC). The whole Asset4 dataset is filtered based on the
Dutch companies included in the first dataset. Then, the dataset is used to calculate average
E, S and G scores. After removing missing values, the ESG dataset includes 495 firm-year
observations. Lastly, financial data is collected form the Amadeus database of Bureau van Dijk.
Here, the ROA, Leverage and Size of the companies are collected.
After collecting all three datasets, the data is merged into the final dataset and observations
with missing values are filtered out. Based on ISIN13 number and year, the final dataset
consists of 224 board-year observations which include both the board characteristics and ESG
data of 44 Dutch firms. This sample size is relatively small compared to other literature such
as the studies Harjoto et al. (2015), Christensen et al. (2022) and Serafeim and Yoon (2022),
which have respectively around 10,000, 30,000 and 30,000 firm-year observations. The small
sample of 224 board-years could limit the ability to generalize the results of this paper on the
real world. By limiting to Dutch companies, our results may not hold for countries with a
different culture. Additionally, results can be affected more by outliers and become less
precise.
This paper uses prior literature with smaller sample sizes than mentioned above, to
contextualize the sample size. Velte (2016), which has around 1,000 firm-year observations of
German and Austrian firms, comes closer to the sample size of this paper. This study mentions
that the small sample size reduces the significance of their results and comment this as an
improvement point for further research. Another paper with a comparable sample size, is
Alazzani, Hassanein and Aljanadi (2017). This paper analyses the effect of female directors on
social and environemnt perfromance of Malaysian firms during 2009 and had 133
observations. They show that their results show useful insights despite the small smaple size.
A limitation mentioned in this paper is the fact that not all countries have the same culture as
Malaysia and therefore results might nog hold for other countries. Lastly, a study from
Marinova, Platenga and Remery (2016) also made conclusions about the effect of gender
diverse boards, based on similar observations. The paper used the Amadeus database of
Bureau van Dijk for both Dutch and Danish companies. Here, a total of 186 observations were
12
E.g., Velte (2016), Serafeim and Yoon (2022), and Berg et al. (2022)
13
International Securities Identification Number
11
used to analyze the effect of female board members on financial results in 2007. The
measurment for board gender diversity also consist of the percentage of females in boards.
Although these limitations also hold for this paper, efforts are made to validate the results. To
mitigate the effects of outliers, nontabulated robustness checks are performed with
standardized values of the variables. The precision of the results is also strengthened with the
use of regressions with different sets of variables from the dataset. These additions, in
combination with the use of previous literature which use comparable sample sizes, affirms
the feasibility of meaningful outcomes of this research, even within the constrained data
context. Table 3.1 shows the descriptive statistics of the final dataset.
The period of the data is form 2010 until 2022. The starting year is based on data availability
at the time of writing this paper. Data of Asset4 is available, for this research, since 2010. This
is used as reason to use 2010 as starting point for the dataset. The endings year is based on
the most recent available data for the researcher. This consist of data of Dutch companies
through Bureau van Dijk, Asset4 and BoardEx. This period also includes a period before and
after the introduction of the NFRD, which focused on voluntary non-financial reporting. The
NFRD became law in EU countries by the end of 2016 (European Comission, 2014). This paper
will account for this event through year fixed effects.
Table 3.1 shows the ESG related measurements used for the Asset4 dataset. First, the
environment pillar consists of the resource use score, emission score and environmental
innovation score. Second, the social pillar includes workforce, human rights, community, and
product responsibility scores. Workforce will be excluded in a second analysis for the social
pillar. Next the governance pillar includes CSR strategy score, shareholder score and
management score. Table 3.2 shows an overview of the used measurements and provides
definitions for the used abbreviations for the measurement variables. Table 3.3 shows a list of
the 44 Dutch companies which are included in this paper including their ISIN number and SIC
code.
Table 3.1 also shows statistics of company’s board characteristics. FemaleFrequency is the
number of females divided by the total amount of board members. Here, the average female
frequency is 21% of the total board and this frequency ranges from 0 till 50%. This shows
female board members are underrepresented compared to male board members, which are
represented between 50% and 100% of board members and on average 79% represented, at
the time of writing this paper. Prinses Laurentien of the SER (2019) mentions that real equality
between male and female, should result in a ‘fifty-fifty’ distribution of power. Thus, an
increase in female directors from 21% to 50% will lead to a more equal distribution of power
in the board of directors according to the Ser (2019). This variable is therefore used as the
main independent variable in the OLS regression. When the frequency of females increases,
gender diversity becomes more present. Further variables are NationalityMix, which shows
the proportion of member from a different country, and NoDirectors, which display the
number of directors on a board.
Individual characteristics are taken to an average per board. TimeRetirement, for example,
shows how many years a director has till retirement. This is the average of all members in the
board. TimeRole, TimeBrd, TimeinCo show the years a director is in a role, board, or company
and AvgTimeOthCo shows the average time of a director in other companies. Next, the
12
number of qualifications and network size of directors are displayed. Data on age, total
previous board sat on and total current boards sitting on is left out of the final data, because
there were too many missing values. Table 3.1 ends with financial data of the Dutch
companies. ROA is defined as profit divided by total assets; Leverage is defined as debt divided
by total assets and Size is equal to the natural logarithm of the total assets. This last value is
transformed, because the total asset had a different measurement unit and bigger size than
the rest of the variables.
Table 3.1 Descriptive Statistics

n Mean Sd Min Max Range
ESG_Score 224 58.78 17.34 7.46 92.1 84.7
esgru_s 224 63.05 28.24 0.00 99.7 99.7
esge_s 224 58.23 27.40 0.00 99.0 99.0
esgi_s 224 41.71 30.97 0.00 99.7 99.7
esgm_s 224 49.99 26.61 0.67 98.9 98.2
esgs_s 224 55.34 27.22 0.67 99.5 98.8
esgcsrs_s 224 48.21 30.38 0.00 98.1 98.1
esgw_s 224 71.31 18.29 21.28 99.2 78.0
esghr_s 224 56.69 34.81 0.00 98.4 98.4
esgcom_s 224 73.04 24.63 0.95 99.7 98.8
esgpr_s 224 54.93 27.82 0.00 98.2 98.2
E_Score 224 54.33 23.59 0.00 98.8 98.8
S_Score 224 63.99 19.66 8.31 96.8 88.5
G_Score 224 51.18 18.59 5.50 92.5 87.0
FemaleFreq 224 0.21 0.12 0.00 0.5 0.5
NatMix 224 0.49 0.28 0.00 0.8 0.8
NoDirector 224 9.30 2.72 4.00 19.6 15.6
TimeRetirement 224 9.43 3.01 0.68 22.6 22.0
TimeRole 224 4.45 1.97 0.00 10.0 10.0
TimeBrd 224 5.82 2.58 0.00 13.3 13.3
TimeInCo 224 7.04 3.13 0.00 15.5 15.5
AvgTimeOthCo 224 3.25 1.66 0.00 8.6 8.6
NoQuals 224 1.98 0.47 0.83 3.4 2.6
NetworkSize 224 1228.77 716.08 106.20 3214.8 3108.6
ROA 224 4.50 10.17 -84.07 45.2 129.2
Leverage 224 0.57 0.21 0.061 1.3 1.2
Size 224 22.40 1.67 14.012 25.5 11.5
Note: All variables are on original scale except for Size, which represents the natural logarithm of total asset
value of Dutch firms.
13
Table 3.2 ESG measurement definitions
Score Type Abbreviation
ESG Score esg_s
Resource Use Score esgru_s
Emissions Score esge_s
Environmental Innovation Score esgi_s
Management Score esgm_s
Shareholders Score esgs_s
CSR Strategy Score esgcsrs_s
Workforce Score esgw_s
Human Rights Score esghr_s
Community Score esgcom_s
Product Responsibility Score esgpr_s
14
Table 3.3 Names of companies in dataset
ISIN Name Firm-years SIC
NL0000008977 HEINEKEN HOLDING N.V. 10 2082
NL0000009082 KONINKLIJKE KPN N.V. 7 4813
NL0000009165 HEINEKEN N.V. 10 2082
NL0000009538 KONINKLIJKE PHILIPS N.V. 6 3845
NL0000235190 AIRBUS SE 10 3721
NL0000288918 VASTNED RETAIL N.V. 3 6798
NL0000289213 WERELDHAVE N.V. 9 6798
NL0000334118 ASM INTERNATIONAL N.V. 8 3559
NL0000337319 KONINKLIJKE BAM GROEP N.V. 4 1600
NL0000360618 SBM OFFSHORE N.V. 8 1389
NL0000379121 RANDSTAD N.V. 10 7363
NL0000395903 WOLTERS KLUWER N.V. 9 8111
NL0000852523 TKH GROUP N.V. 4 3357
NL0000852531 KENDRION N.V. 3 3714
NL0000852564 AALBERTS N.V. 10 3490
NL0000888691 AMG CRITICAL MATERIALS N.V. 2 3310
NL0006237562 ARCADIS N.V. 3 8711
NL0006294274 EURONEXT N.V. 3 6200
NL0009432491 KONINKLIJKE VOPAK N.V. 10 4220
NL0009739416 POSTNL N.V. 7 4210
NL0009805522 YANDEX N.V. 1 7370
NL0010273215 ASML HOLDING N.V. 7 3559
NL0010558797 OCI N.V. 5 2870
NL0010583399 CORBION N.V. 5 2090
NL0010776944 BRUNEL INTERNATIONAL N.V. 3 7361
NL0010801007 IMCD N.V. 6 5160
NL0010832176 ARGENX SE 3 2836
NL0011660485 SIF HOLDING N.V. 1 3312
NL0011794037 KONINKLIJKE AHOLD DELHAIZE N.V. 6 5411
NL0011832811 FORFARMERS N.V. 3 2040
NL0011872650 BASIC-FIT N.V. 3 7990
NL0012015705 JUST EAT TAKEAWAY.COM N.V. 2 5961
NL0012044747 REDCARE PHARMACY N.V. 1 5912
NL0012169213 QIAGEN N.V. 10 3826
NL0012365084 NSI N.V. 3 6798
NL0012817175 ALFEN N.V. 2 3613
NL0013267909 AKZO NOBEL N.V. 3 2851
NL0013332471 TOMTOM N.V. 9 3812
NL0013654783 PROSUS N.V. 3 5961
NL0014332678 JDE PEET’S N.V. 1 2090
NL00150001Q9 STELLANTIS N.V. 3 3711
NL00150003D3 MELTWATER N.V. 1 8742
NL00150006R6 CTP N.V. 1 6519
NL0015000K93 EUROCOMMERCIAL PROPERTIES N.V. 6 6798
15
3.2 Methodology
The methodology used in this research will be a linear regression with year fixed effects. This
approach is suitable, as the only variable of interest is gender diversity. The approach is like
the research of Ahern and Dittmar (2012), who measured the effect of female directors on
Tobin’s Q, and Velte (2016), who measured the effect of gender diverse boards on ESG
performance for German and Austrian companies. A difference-in-difference approach
would also be suitable, by comparing ESG scores non-complaint firms before 2022 with
compliant firms after 2022. Unfortunately, this is not workable at time of writing this paper
due to the small sample size. Based on available data, only one firm could be used for the
treatment group.
The dependent variable in this regression is the ESG rating of a company. For every
hypothesis, the dependent variable will either be the E, S or G score of the ESG rating. The
main independent variable is board gender diversity, expressed as fraction of female board
members. The goal of this model is to capture if a more gender equal board influences the
ESG rating. The formula used per hypothesis will be as follows:
(1) ESGti = a + b1*FemaleFreqit + bn*Controlit + Yit + Iit + eit
In this formula a defines the constant and ESGit stands for the E/S/G rating for firm ‘i’ in year
‘t.’ FemaleFreqit-1 is the main independent variable and shows the fraction of female
directors in the board of directors. A positive relation of this variable with the dependent
variable would mean that an increase in female board members increases E/S/G rating. As
control variables, bn*Controlit is used to control for the other board characteristics, personal
characteristics and firm characteristics. This includes the nationality mix and the number of
directors, as well as the averaged individual characteristics. Because the measurement of
total assets is different in both size and unit, a log transformation is used to calculate the
‘Size’ variable. This allows for a clearer interpretation and reduces variance. Next Yit is used
for the year fixed effects. These effects are used to capture changes due to macroeconomic
events over the year, such as introduction of NFRD or the Covid-19 pandemic. Due to the
small number of firms in the dataset, only the first digit of the SIC code is used for industry
fixed effects, noted as Iit, to control for industry related factors. Lastly, the error term is
included with the eit.
16
4. Results
In this section, the results of the OLS regression will be shown per hypothesis. For each
hypothesis will be clear if the expected outcome will hold or if the hypothesis will be rejected.
This is based on a null hypothesis which states that there will be no effect of gender diversity
on E/S/G rating. To evaluate the significance of all outcomes, the t-statistic can be calculated
form the coefficient divided by the standard error, which is in parentheses. An effect of the
independent variable on the dependent variable is always expressed by assuming everything
else stays constant. As the unit of the main variable ranges from 0 till 1, the effects are
explained as a 0.1-unit increase leads to an increase of 0.1 times the coefficient in E/S/G score,
rounded to two decimals.
First, the results of the E score will be shown. S and G will follow next. The last results are from
the total ESG score. When reading the outcomes, the first column shows the result of the
linear regression based on the main independent variable only. The second column includes
the control variables. Columns 3 and 4 repeat the steps taken in the first two columns, but
with the inclusion of year and industry fixed effects. The inclusion of these fixed effects causes
a different value for the coefficient, because fixed effects absorb the average effects of the
predictors. The fixed effects control for time specific events, such as the introduction of NFRD
or the covid 19 crisis, as well as industry related events such as differences in risk and
performance across industries. After the main results, this section will end with robustness
checks.
4.1 Environmental score

The first test is whether gender diversity influences the environmental score. The results of
the linear regressions are visible in Table 4.1.
In the first column, FemaleFreq has a positive significant coefficient of 70.535 on a 99%
significance level and a standard error of 12.282. When the number of females increases with
.1, the environment score increases with 7.05 points. The high standard error is due to the
small sample size. When adding control variables, the R-squared becomes larger and the
coefficient of the main variable stays positive and significant. Another positive significant
variable is the size of the company. There is also a variable with a negative effect on
environment score. Keeping everything else equal, the environment score drops when a board
member with a non-Dutch nationality joins the board. This is without considering fixed effects.
After including the year and industry fixed effects, the sign and significance of the main
coefficient stays the same. An increase in the female frequency with 0.1 leads to an increase
in environment score of 8.71 in the single linear regression and 4.20 in the linear regression
with multiple variables. The effects for nationality mix becomes insignificant and both time in
board and time in company coefficients become significant on 95% level. This shows that the
longer a board member is active in the company the lower the environment score is, but the
longer the member is in the board itself, the environment score rises. The firm specific
variables are all positive related to the environment score and only Size is significant. This
indicates that larger firms tend to care more about the environment and have a higher score
for this pillar.
17
Based on the findings in Table 4.1, the null hypothesis can be rejected. An increase in the
frequency of female directors does lead to a better environment score. Therefore, the
prediction in this paper, a positive relation between gender diverse boards and environmental
score, holds.
Table 4.1 Linear regression results for the relation between the frequency of females and
the environmental score
Variable (1) (2) (3) (4)
FemaleFreq 70.535*** 35.905*** 87.076*** 41.988***
(12.282) (11.211) (21.214) (15.300)
NatMix -24.621*** -10.330
(6.034) (11.176)
NoDirector 0.789 0.909
(0.596) (0.958)
TimeRetirement 0.254 0.285
(0.463) (0.710)
TimeRole 0.087 0.283
(1.140) (1.329)
TimeBrd 1.339 3.606**
(1.483) (1.483)
TimeInCo -1.041 -3.367**
(0.963) (1.335)
AvgTimeOthCo 1.249 1.881
(1.050) (1.825)
NoQuals 4.377 0.891
(2.949) (5.670)
NetworkSize 0.010*** 0.006
(0.002) (0.004)
ROA 0.187 0.149
(0.119) (0.097)
Leverage 8.876 11.504
(6.701) (10.487)
Size 5.821*** 6.428**
(1.254) (2.736)
Constant 39.616*** -113.009***
(2.956) (23.951)
Observations 224 224 224 224
R2 0.129 0.506 0.289 0.646
Adjusted R2 0.125 0.476 0.219 0.586
Residual Std. 22.063 (df = 17.081 (df = 20.843 (df = 15.175 (df =
Error 222) 210) 203) 191)
32.979*** (df = 16.568*** (df =
F Statistic
1; 222) 13; 210)
Note: Standard errors are in parentheses. Column (1) and (2) represent respectively one and multiple variables
in the regression. Column (3) and (4) also represent respectively one and multiple variables and include both
year and 1 digit SIC code industry fixed effects. All standard errors are clustered at firm level. *p<0.1; **p<0.05;
***p<0.01
18
4.2 Social Score
In the second hypothesis, the social pillar will be evaluated. For this pillar, two tests will be
performed. One including the workforce measurement and one without this measurement.
The results are visible in Table 4.2 and Table 4.3.
the social score
Variable (1) (2) (3) (4)
FemaleFreq 51.485*** 31.115*** 65.793*** 39.781**
(10.411) (9.540) (23.699) (15.524)
NatMix -11.110** -5.858
(5.135) (7.696)
NoDirector 1.857*** 0.781
(0.507) (0.635)
TimeRetirement -0.665* -0.078
(0.394) (0.424)
(0.970) (1.083)
TimeBrd 2.202* 1.960
(1.262) (1.388)
TimeInCo -0.963 -1.508
(0.820) (0.981)
AvgTimeOthCo -1.132 -1.391
(0.894) (1.387)
NoQuals 1.633 0.828
(2.510) (3.916)
NetworkSize 0.006*** 0.008**
(0.002) (0.003)
ROA 0.052 0.130
(0.101) (0.120)
Leverage -4.872 -20.229***
(5.702) (7.146)
Size 4.243*** 4.913**
(1.067) (1.958)
Constant 53.252*** -58.678***
(2.506) (20.381)
R2 0.099 0.485 0.346 0.642
Adjusted R2 0.095 0.453 0.281 0.582
Error 222) 210) 203) 191)
24.455*** (df = 15.232*** (df =
F Statistic
1; 222) 13; 210)
***p<0.01
19
In Table 4.2, the first column shows a significant positive effect of female frequency on social
score, with a coefficient of 51.485. In the second column, this coefficient is lower, but still
positive and significant. Here, a 0.1 unit increase in FemaleFreq, results in an increase of 3.11
points in the score of the social pillar. Only the number of directors, network size and Size are
positive and significant on the same level. As by the environment score, the nationality mix
has a negative effect and is significant on the 95% significance level.
When fixed effects are included, all positive and negative effects stay the same. Only the
significance threshold changes. The main independent variable stays positive significant with
a coefficient of respectively 65.793 and 39.781. This means that an increase in the ratio of
females increases with 0.1, leads to an increase in social score of approximately 6.58 (3.40).
The effect is smaller compared to the effects on environmental score. Also, leverage is
negative in social score, but was positive on the environmental score. This means that
companies with more debt perform less in social score. An explanation could be that
companies with more debt have not enough own money to participate in social related events,
such as donating to charity.
When excluding the workforce measurement, the coefficients change. Table 4.3 shows the
coefficients of the independent variables on the social score, after excluding the workforce
measurement. Here, FemaleFreq stays positive and significant in all regressions. After the
inclusion of fixed effects, the coefficient of the main variable becomes 47.376 and the other
coefficients stay around the same as when workforce was included. Only time in company and
time in role become significant in Table 4.3. This assumes that social score is affected by these
variables when the workforce measurement is excluded.
The results in Table 4.2 and Table 4.3 show evidence to reject the null hypothesis, as the
number of female directors does positively influence the social score of a company with and
without the inclusion of the workforce measurement. Although the effect of female
directors on the social score is the lowest of all three pillars, the results are still positive and
significant. Therefore, the expected hypothesis of this paper can be confirmed.
20
the social score excluding the workforce measurement.
Variable (1) (2) (3) (4)
FemaleFreq 55.241*** 36.336*** 68.091** 47.376**
(12.124) (11.360) (26.371) (19.373)
NatMix -10.506* -6.748
(6.114) (8.227)
(0.604) (0.705)
TimeRetirement -1.336*** -0.620
(0.470) (0.496)
TimeRole 1.984* 2.381**
(1.155) (1.198)
TimeBrd 2.045 1.787
(1.503) (1.647)
TimeInCo -1.467 -1.971*
(0.976) (1.121)
(1.064) (1.704)
NoQuals -1.607 -1.675
(2.989) (4.723)
NetworkSize 0.008*** 0.010**
(0.002) (0.004)
ROA 0.076 0.175
(0.121) (0.142)
Leverage -2.567 -20.455**
(6.790) (8.436)
Size 4.442*** 5.226**
(1.270) (2.323)
Constant 50.031*** -55.857**
(2.918) (24.269)
R2 0.086 0.454 0.377 0.629
Adjusted R2 0.081 0.420 0.316 0.567
Residual Std. 21.778 (df = 17.308 (df = 203) 14.954 (df
Error 222) 210) 18.795 (df = = 191)
20.761*** (df = 13.412*** (df =
F Statistic
1; 222) 13; 210)
***p<0.01
21
4.3 Governance Score
The last pillar of the ESG rating is the governance pillar. Table 4.4 shows the effect of the main
and control variables on the governance score.
the governance score.
Variable (1) (2) (3) (4)
FemaleFreq 65.526*** 58.139*** 63.825*** 57.262***
(9.395) (9.325) (20.814) (14.455)
NatMix -1.977 -7.071
(5.019) (9.195)
(0.496) (0.878)
TimeRetirement -1.207*** -1.006*
(0.385) (0.589)
(0.948) (1.519)
TimeBrd -1.047 -1.651
(1.234) (1.897)
TimeInCo -0.807 -0.289
(0.801) (1.287)
(0.873) (1.497)
NoQuals 4.868** 6.632
(2.453) (4.915)
NetworkSize 0.001 0.003
(0.002) (0.004)
ROA 0.074 0.136
(0.099) (0.112)
Leverage 6.763 4.855
(5.574) (12.749)
Size 2.101** 1.690
(1.043) (1.647)
Constant 37.507*** -16.645
(2.261) (19.922)
R2 0.180 0.450 0.307 0.526
Adjusted R2 0.176 0.416 0.239 0.446
Error 222) 210) 203) 191)
48.648*** (df = 13.217*** (df =
F Statistic
1; 222) 13; 210)
***p<0.01
22
The results of the independent variable in Table 4.4 do not differ much from the previous two
pillars. The female frequency is positive and significant in all regressions and its coefficient is
higher for this pillar than in the others. With fixed effects, an increase in the frequency of
female directors with 0.1 results in an increase in governance rating of 5.73 points in
governance score.
Further, time to retirement and the number of directors is significant without fixed effects,
but only time to retirement stays significant, on a lower interval, after fixed effects are
included. This means that the governance performance drops when directors are aged closer
to their retirement age. All other variables do not have any significance after including fixed
effects. This is the only pillar which is not affected by any financial performance variable.
Table 4.4 confirms the expectation of this paper and rejects the null hypothesis. The frequency
of females on a board do influence the governance rating of a firm. Companies could include
more female directors to increase board diversity and create better governance in the
company.
4.4 Overall ESG Score

Based on the findings of the individual pillars, the conclusion can be drawn that a more gender
diverse board increases the ESG rating of a company. To reinforce this result, Table 4.5 will
show the coefficient of the main and control variables on the overall ESG score.
The coefficient of FemaleFreq in the second column of Table 4.5, shows that an increase in
female frequency of 0.1 increases the total ESG score with 3.96 before fixed effects. After
adding the fixed effects to the regression, this effect increases to 4.45 ESG points. All other
board characteristics do not have a significant effect. The individual variable network size and
the firm specific variables ROA and Size all have a positive significant effect on the ESG score,
while there is no variable which has significant negative relation.
When comparing the three pillars to each other, the frequency of female directors has the
most effect on the governance score of a company and the least effect on the social score.
Governance score is more affected by an increase in female directors than the overall ESG
score, while the environment and social score had relatively lower coefficients than the overall
ESG score.
Other findings based on these results are that nationality mix is always negative related and
the number of directors always positive. The inclusion of fixed effect causes these variables to
be insignificant. Also, NetworkSize is the only personal characteristic variable that is significant
in almost all regressions. Lastly, the financial control variables are most of the time positive.
Only leverage is negative and significant for social score. This impact is so large, that the total
effect on ESG is also negative, but it is not significant.
23
the ESG score.
Variable (1) (2) (3) (4)
FemaleFreq 62.105*** 39.590*** 74.658*** 44.509***
(8.730) (7.547) (20.359) (11.177)
NatMix -9.776** -1.201
(4.062) (6.797)
(0.401) (0.591)
TimeRetirement -0.297 -0.026
(0.312) (0.455)
(0.767) (1.046)
TimeBrd 1.709* 2.029
(0.998) (1.426)
TimeInCo -0.817 -1.656
(0.648) (1.083)
AvgTimeOthCo -0.302 0.016
(0.707) (1.161)
NoQuals 4.652** 2.789
(1.985) (3.865)
NetworkSize 0.007*** 0.008***
(0.001) (0.003)
ROA 0.077 0.111*
(0.080) (0.058)
Leverage -2.149 -9.751
(4.511) (6.621)
Size 3.359*** 3.615**
(0.844) (1.662)
Constant 45.827*** -52.437***
(2.101) (16.123)
R2 0.186 0.586 0.321 0.681
Adjusted R2 0.182 0.560 0.254 0.628
Error 222) 210) 203) 191)
50.613*** (df = 22.846*** (df =
F Statistic
1; 222) 13; 210)
***p<0.01
24
4.5 Robustness checks
The last part of this result section will show robustness tests to test the reliability of the results
of this research. This is done by selecting different groups of variables to perform two extra
linear regressions. The firm specific variables are included in all regressions. The results of
these tests are included in the appendix of this paper. Again, columns 3 and 4 show the
regressions with year fixed effects. Lastly, the regressions are also performed while all
variables are scaled by mean around zero and a standard deviation of one. These results are
not tabulated.
First, a regression is performed with only the independent variable and the board
characteristics provided in the dataset. This are the variables ‘FemaleFreq’ (independent),
‘NatMix’ and ‘NoDirector’. Column 1 and 3 of the robustness results refer to these tests.
Columns 2 and 4 of the robustness results, refer to the second robustness test. Here, the
averaged individual characteristics are included and replace the board characteristics in the
regression.
For the environment score, Table 7.1, the independent variable stays positive and significant
in both checks. This also holds for the Size, time in board and time in company variable which
were initially significant. When the standardized regressions are performed, the main
independent variable is also positive significant.
Next, the social score is shown in Table 7.2 and 7.3 (excluding workforce measurement). Also,
for this score, the frequency of female directors has a significant positive effect in the
tabulated and nontabulated regression results. The control variable ‘TimeRole’ becomes
significant in the tabulated results of Table 7.2, meaning that social scores increase if a board
member is longer active in his/her role within the board. This was already the case for the
regression without including the workforce measurement.
The same explanation could be used for the governance score, Table 7.4, and overall ESG
score, which robustness checks are visible in Table 7.5. The robustness check of the
governance score also has no difference on the independent variable. In the nontabulated
results, the coefficient of the standardized main coefficient is the largest for governance score.
It has also relatively the largest effect on the governance score out of all variables used. This
means that the increase in females had the most effect on the governance score of a firm and
that governance is most affected by the female frequency out of all used variables. For the
overall ESG rating, all financial control variables become significant in the robustness check.
So, when ROA or Size increases, the total ESG score increase. If the leverage of a firm increases,
the ESG score is assumed to go down.
25
5. Conclusion and Discussion
This paper investigates the effects of board diversity on the ESG performance of companies in
the Netherlands. Previous research shows a positive relation between the addition of female
directors and non-financial performances of firms. With the current female director
percentage of 21%, the Dutch government imposes a new law to improve the number of
females in the board of directors.
To test if an increase in female directors is useful for ESG performance and to test if previous
non-financial benefits can be expressed in the ESG score, 4 hypotheses are formulated to
answer the research question. The main independent variable in this paper is the frequency
of female directors.
This paper shows evidence that a more gender diverse board, through an increase in
underrepresented female directors, leads to improved ESG scores. First, the environment
score has a significant positive relation with an increase in female directors. This does not
change after robustness checks. For the social and governance scores, the frequency of female
directors is also positively related. When testing for reliability of the results, the main
independent variable did not change.
After conducting the main regression and the (non) tabulated robustness checks, all
expectations at the beginning of this paper are confirmed. Meaning that an increase in female
directors, and thus an increase in gender diverse boards, result in better ESG performances.
The effect is most visible on governance score, followed by environment and social score.
To end this section, it is important to mention that there are some shortcomings in this paper.
First, the dataset only consists of 224 observations of Dutch firms. This limits the
generalizability of the results. The use of a dataset with more firms is beneficial, because more
data result in more precise outcomes, less influence of outliers and more precise estimates of
coefficients. Also, the use of multiple digit industry fixed effects is possible with more firms
(per industry) in the dataset. This paper thus recommends further research to extend these
findings by using a bigger dataset and preferable include multiple countries. Another point for
future research, is to extend the research model. When more data is known for the period
after 2022, a difference-in-difference approach can investigate if the Dutch gender diversity
law has its desired benefits. A treatment group of firms which comply with this percentage
should then have a significant higher increase in ESG score than firms who did not comply
before the law.
Lastly, when the CSRD becomes active, future research might investigate whether the findings
in this paper still hold based on new future definitions of ESG measurements and increased
knowledge about these ESG measurements. The definitions of ESG measurements might
change in the future and capture more facets of ESG performance of a firm. Furthermore, the
amount of education on this topic should increase when stakeholders become more familiar
with the new directive. A future analysis could explore the effect of (ESG related) education
of board members on the ESG performance of a firm.
26
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7. Appendix
Table 7.1 Robust linear regression results for the relation between the frequency of females
and the environmental score
Variable (1) (2) (3) (4)
FemaleFreq 49.433*** 30.277*** 52.997** 41.505**
(10.793) (11.487) (22.039) (16.090)
NatMix -12.770** -6.775
(5.975) (16.233)
NoDirector 0.509 0.737
(0.569) (0.990)
TimeRetirement 0.522 0.389
(0.474) (0.764)
(1.169) (1.320)
TimeBrd 0.538 3.088**
(1.469) (1.495)
TimeInCo -0.635 -3.263**
(0.984) (1.356)
AvgTimeOthCo 1.031 1.903
(1.079) (1.657)
NoQuals 3.607 0.496
(3.037) (5.656)
NetworkSize 0.008*** 0.006
(0.002) (0.004)
ROA 0.139 0.203* 0.101 0.169
(0.125) (0.121) (0.115) (0.120)
Leverage 9.448 15.485** 10.165 12.280
(6.741) (6.633) (13.193) (9.814)
Size 7.662*** 4.783*** 7.838*** 6.518***
(1.026) (1.103) (2.482) (2.203)
Constant -132.071*** -93.962***
(19.343) (23.046)
R2 0.415 0.467 0.568 0.639
Adjusted R2 0.399 0.440 0.513 0.583
Residual Std. 18.289 (df = 17.662 (df = 198) 15.230 (df
Error 217) 212) 16.462 (df = = 193)
25.680*** (df = 16.899*** (df =
F Statistic
6; 217) 11; 212)
***p<0.01
32
and the social score
Variable (1) (2) (3) (4)
FemaleFreq 36.210*** 30.250*** 46.807*** 40.239**
(9.092) (9.725) (17.138) (15.936)
NatMix -2.042 2.565
(5.033) (9.266)
NoDirector 1.130** 0.564
(0.479) (0.690)
TimeRetirement -0.491 -0.004
(0.401) (0.464)
TimeRole 1.534 1.967*
(0.989) (1.069)
TimeBrd 0.836 1.477
(1.244) (1.390)
TimeInCo -0.488 -1.404
(0.833) (1.001)
AvgTimeOthCo -1.516* -1.436
(0.913) (1.399)
NoQuals 1.801 0.709
(2.571) (3.945)
NetworkSize 0.005*** 0.008***
(0.002) (0.003)
ROA 0.022 0.113 0.075 0.151
(0.105) (0.103) (0.134) (0.125)
Leverage -7.323 -4.792 -19.369** -20.445***
(5.679) (5.616) (7.670) (7.041)
Size 5.820*** 5.411*** 5.865*** 5.219***
(0.864) (0.933) (1.465) (1.804)
Constant -79.322*** -70.101***
(16.296) (19.512)
R2 0.402 0.450 0.578 0.637
Adjusted R2 0.386 0.422 0.525 0.581
Error 217) 212) 198) 193)
24.348*** (df = 15.771*** (df =
F Statistic
6; 217) 11; 212)
***p<0.01
33
and the social score excluding the workforce measurement.
Variable (1) (2) (3) (4)
FemaleFreq 36.431*** 35.540*** 46.940** 47.184**
(10.935) (11.447) (20.319) (19.390)
NatMix 0.380 2.571
(6.054) (9.437)
NoDirector 0.984* 0.519
(0.576) (0.776)
TimeRetirement -1.170** -0.550
(0.472) (0.540)
TimeRole 2.426** 2.511**
(1.165) (1.207)
TimeBrd 0.740 1.417
(1.464) (1.684)
TimeInCo -1.014 -1.895*
(0.981) (1.141)
(1.075) (1.701)
NoQuals -1.441 -1.915
(3.027) (4.642)
NetworkSize 0.007*** 0.010**
(0.002) (0.004)
ROA 0.060 0.135 0.136 0.190
(0.127) (0.121) (0.154) (0.144)
Leverage -3.820 -2.529 -16.888* -20.059**
(6.830) (6.610) (9.871) (7.975)
Size 6.221*** 5.568*** 6.052*** 5.328**
(1.040) (1.099) (1.606) (2.075)
Constant -92.804*** -66.922***
(19.599) (22.967)
Observations 224 224 0.505 224
R2 0.353 0.430 46.940** 0.626
Adjusted R2 0.335 0.400 -20.319 0.568
Residual Std. 18.530 (df = 17.601 (df = 15.981 (df = 198) 14.939 (df
Error 217) 212) 198) = 193)
19.718*** (df = 14.514*** (df =
F Statistic
6; 217) 11; 212)
***p<0.01
34
and the governance score.
Variable (1) (2) (3) (4)
FemaleFreq 50.520*** 59.266*** 45.005*** 58.725***
(8.858) (9.398) (16.466) (14.763)
NatMix 3.492 1.440
(4.903) (9.467)
NoDirector 1.871*** 1.714*
(0.467) (0.876)
TimeRetirement -1.135*** -0.899
(0.388) (0.645)
TimeRole 1.759* 2.467*
(0.956) (1.327)
TimeBrd -2.058* -2.468
(1.202) (1.626)
TimeInCo -0.500 -0.107
(0.805) (1.249)
(0.883) (1.310)
NoQuals 5.291** 6.618
(2.485) (4.971)
NetworkSize 0.001 0.003
(0.002) (0.004)
ROA 0.050 0.127 0.092 0.173
(0.102) (0.099) (0.121) (0.110)
Leverage 10.018* 4.559 8.299 3.779
(5.532) (5.427) (13.808) (11.803)
Size 1.580* 3.559*** 1.815 2.376
(0.842) (0.902) (1.447) (1.525)
Constant -19.819 -33.978*
(15.875) (18.856)
R2 0.366 0.426 0.443 0.512
Adjusted R2 0.348 0.396 0.373 0.436
Error 217) 212) 198) 193)
20.851*** (df = 14.281*** (df =
F Statistic
6; 217) 11; 212)
***p<0.01
35
and the ESG score.
Variable (1) (2) (3) (4)
FemaleFreq 47.007*** 38.749*** 52.687*** 46.733***
(7.382) (7.731) (15.035) (11.915)
NatMix 0.104 6.634
(4.087) (10.034)
(0.389) (0.640)
TimeRetirement -0.146 0.032
(0.319) (0.490)
(0.786) (1.027)
TimeBrd 0.554 1.381
(0.989) (1.399)
TimeInCo -0.414 -1.502
(0.662) (1.101)
(0.726) (1.046)
NoQuals 4.775** 3.069
(2.044) (3.921)
NetworkSize 0.006*** 0.008***
(0.001) (0.003)
ROA 0.037 0.128 0.053 0.143**
(0.085) (0.082) (0.082) (0.064)
Leverage -2.754 -1.940 -9.908 -11.703*
(4.611) (4.464) (6.932) (6.111)
Size 4.670*** 4.309*** 4.924*** 4.418***
(0.702) (0.742) (1.502) (1.461)
Constant -65.111*** -61.539***
(13.231) (15.510)
R2 0.493 0.553 0.602 0.672
Adjusted R2 0.479 0.530 0.551 0.621
Error 217) 212) 198) 193)
35.230*** (df = 23.860*** (df =
F Statistic
6; 217) 11; 212)
***p<0.01
36

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Board gender diversity and the effect on ESG ratings

Erasmus University Rotterdam – Erasmus School of Economics

Stefan van Zundert

Keywords: ESG score, environment, social, governance, board gender diversity

2.1 Gender diversity in the Netherlands

2.2 The rise of ESG

2.3 Connection between gender diversity and ESG

3.1 Sample Selection

Table 3.1 Descriptive Statistics

(1) ESGti = a + b1FemaleFreqit + bnControlit + Yit + Iit + eit

4.1 Environmental score

4.4 Overall ESG Score

CBS. (2022). Dashboard Bevolking. CBS. Opgehaald van https://www.cbs.nl/nl-

CBS. (2023). SDG 5 Gender equality. Opgehaald van https://www.cbs.nl/en-gb/dossier/well-being-

European Comission. (2014). Directive 2014/95/EU on disclosure of non-financial and diversity

Siciliano, J. I. (1996). The Relationship of Board Member Diversity to Organizational Performance.

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